Income Tax Appellate Tribunal - Ahmedabad
Rasna Pvt. Ltd.,, Ahmedabad vs Assessee on 7 March, 2012
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IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "B"
Before SHRI D K TYAGI - JUDICIAL MEMBER
And SHRI T R MEENA - ACCOUNTANT MEMBER
ITA no.1761/Ahd/2010
(Assessment Year:-2005-06)
Rasna Pvt. Ltd., Rasna V/s The Commissioner of
House, Opp. Shears Income-tax, Ahmedabad-
Tower, Gulbay Tekra III, Ahmedabad
Road, Ahmedabad
PAN: AABCR 5577 P
[Appellant] [Respondent]
Assessee by :- Shri P F Jain, AR
Revenue by:- Shri B K S Pandya, CIT - DR
Date of Hearing:- 07-03-2012
Date of Pronouncement:- 30-03-2012
ORDER
PER D K TYAGI (JM):- This appeal filed by assessee is directed against an order dated 24-03-2010 passed u/s 263 of the Income-tax Act, 1961 by the learned Commissioner of Income- tax, Ahmedabad-III [hereinafter referred to as the "CIT"] for Assessment Year 2005-06.
2 The brief facts of the case are that assessment u/s 143(3) of the Act was finalized determining the losses of Rs.4,38,16,860/-. Subsequently, the learned CIT was of the view that this order passed by the AO is erroneous and prejudicial to the interests of Revenue and therefore, initiated proceedings u/s 263 of the Act by issuing following notice:-
2"Sir, Sub: Initiation of action u/s.263 of the I.T. Act, 1961, In the case of Rasna Pvt. Ltd.-A.Y.2005-06 Ref: Order u/s. 143" (3) of the I.T. Act, 1961 dated 28/12/2007 passed by the DCIT Circle-5 Ahmedabad.
PAN: AABCR5577R Please refer to the above.
1 On an examination of case records for the A.Y. 2005-06, it is seen that the assessment order passed under section 143(3) by the DCI' Circle-5, Ahmedabad on 28/12/2007 appears to be erroneous an prejudicial to the interest of revenue for the reasons mentioned in the subsequent paragraphs.
2 The DCIT Circle-5, Ahmedabad had finalized the order u/s. 143(: determined the total losses of Rs.4,38,16,860/-. The assessee company is mainly dealing in distribution of soft drink concentrate. On verification of records, it is noticed that the assessee has shown tax free dividend Rs.49,70,355/-. The assessee company has incurred loss in the redemption of the following securities.
81. Name Purchase amount Sale amount & Loss (Rs.) No. & date date
1. Kotak Mutual Rs.19,98,850/- Rs.19,37,370/- Rs.61.480/-
Fund k-30 08/05/2004 11/10/2004
2. Reliance Vision Rs.20,00,000/- Rs.18,73,306/- Rs.1,26,694/-
Fund 04/11/2004 08/11/2004
3. Templeton Blue Rs.20,00,000/- Rs.19,54,104/- Rs.45,896/-
Chip Mutual 06/05/2004 03/11/2004
Fund
Total Rs.2,34,070/-
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The above transactions have been done within 9 months of the purchase of units and, hence, the provisions of section 94(7)(b).(ii) are applicable and the loss should have been, prima-facie, disallowed.
The assessee has earned the following tax free incomes.
a Interest on Tax free bonds- Rs.6.71 lakhs
b Dividends- Rs.49,70 lakhs
c Long Term Capital gain
exempted u/s. 10(36) Rs.4.54 lakhs
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Total Rs.60.95 lakhs
The assessee has incurred interest expenses of Rs.6.16 lakhs during the year. It is also relevant that interest free loans have been given to a wholly owned subsidiary to the tune of Rs.132.20 lakhs. Therefore the provision of section 14A should have been invoked to disallowed the interest expenses incurred to earn tax free incomes like dividend, interest on tax free bonds etc.
3 Considering the facts mentioned above, the order dated 28/12/2007 passed by the DCIT Circle-5, Ahmedabad under section 143(3) for the A.Y. 2005-06 appears to be erroneous and prejudicial to the interests of the revenue. 1, therefore, intend to modify the said order and issue suitable directions in this regard to the Assessing Officer in exercise of powers conferred on me under the provisions of section 263.
4 You are therefore, requested to show cause as to why such an order under section 263 of the I.T. Act 1961, should not be made in you: case. For this purpose, you may appear before the undersigned either ii person or through your Authorized Representative on 18/03/2010 a 3.00 p.m. in my office at the above mentioned address. If you do not wish to appear in person or through your Authorized Representative, you may make your submission in writing so as to reach the undersigned on or before the appointed date."
3 After taking into consideration the submissions of the assessee, the learned CIT passed the order holding as under:-
4"6 In the light of the foregoing discussion:
(a) The AO is directed to modify the assessment order dated 28-12-07 by adding a sum of Rs.1,26,694/-.
(b) The AO is further directed to add the sum of Rs.4,54,322/- wrongly claimed exempt u/s 10(36) / 10(38).
(c) Lastly, the AO is directed to work out the disallowance u/s 14A in respect of exempt income. The assessment order is set-aside to this limited extent.
4 Aggrieved by this order, the assessee is in appeal before us. At the time of hearing, the learned counsel of the assessee, at the outset, challenged the jurisdiction of the learned CIT invoking the provisions of section 263 in assessee's case. His contention was that the learned CIT has initiated revisionary proceedings u/s 263 on the basis of objection raised by the Internal Audit of the Department which cannot be the ground for initiating these proceedings in view of the decision of the Hon'ble Calcutta High Court in the case of Jeewanlal (1929) Ltd. vs. Addl. CIT (1977) 108 ITR 407 (Cal) and therefore, the order passed by the learned CIT deserves to be quashed.
5 The learned DR, on the other hand, submitted that there is no basis for submissions made by the learned counsel of the assessee that the revisionary proceedings in this case have been initiated by the learned CIT on the basis of audit objection, therefore, this ground of the assessee is devoid of any merit.
6 We find force in the contention of the learned DR as there is no mention of audit objection in the notice issued by the 5 learned CIT for initiating 263 proceedings, therefore, we are not inclined to accept the contention of the assessee's counsel, and the assumption of jurisdiction by the learned CIT is upheld for 263 proceedings.
7 On merits, the learned counsel of the assessee was fair enough to concede that the learned CIT's direction to modify the assessment order by adding a sum of Rs.1,26,694/-, does not require any interference and so to this extent the learned CIT's order is upheld.
8 In respect of other directions to add the sum of Rs.4,54,322/- wrongly claimed exemption u/s 10(36) / 10(38), the assessee' contention was that this issue was not mentioned in the notice issued by the learned CIT while initiating 263 proceedings and, therefore, the learned CIT has traveled beyond his jurisdiction to give such direction to the AO and, therefore, to this extent, the order of the learned CIT is not justified. The learned DR did not object to this contention of the assessee and therefore, we agree with the learned counsel of the assessee that the learned CIT was not justified in giving such direction to the AO. This contention of the assessee is allowed.
9 Now coming to the last issue about working out the disallowance u/s 14A in respect of exempt income, the learned counsel of the assessee submitted that this issue was looked into by the AO during the assessment proceedings and therefore, the learned CIT should not have set-aside the order passed by the AO 6 on this issue for working out the disallowance afresh. In support of this contention, the learned counsel relied on the questionnaire issued by the AO at the time of assessment proceedings in which the query was raised in respect of disallowance u/s 14A which is available in the paper book. The learned DR relied on the order of the AO.
10 After going through the record, we find that though the contention of the learned counsel of the assessee is correct that the AO did raise the query about the disallowance u/s 14A but there is nothing on record to show that any details or reply was filed by the assessee before the AO. We further find that the learned CIT has simply set-aside the matter back to the file of the AO for fresh adjudication and has not quantified the addition to be made by him. We feel no need to interfere with the order passed by him and the same is hereby upheld on this issue.
11 In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the court today on 30-03-2012 Sd/- Sd/-
(T R MEENA) (D K TYAGI)
ACCOUNTANT MEMBER JUDICI AL MEMBER
Date : 30-03-2012
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Copy of the order forwarded to:
1. Rasna Pvt. Ltd., Rasna House, Opp. Shears Tower, Gulbay Tekra Road, Ahmedabad
2. The Commissioner of Income-tax, Ahmedabad-III, Ahmedabad
3. CIT concerned
4. CIT(A)
5. DR, ITAT, Ahmedabad Bench-B, Ahmedabad
6. Guard File BY ORDER Deputy Registrar Assistant Registrar ITAT, AHMEDABAD